20 Jan

Inflation drops to 3.1 per cent

Inflation drops to 3.1 per cent

The consumer prices index (CPI) inflation fell from 4.1 per cent to 3.1 per cent, the Office for National Statistics has revealed.

Discounting of shoes and clothing in the run-up to Christmas was listed with a major factor in the trend, alongside the VAT cut, lower petrol prices and cheaper cars.

The recent drop from last September's peak of 5.2 per cent may suggest that CPI is in danger of falling below the two per cent target set by the chancellor, something that may prompt more cuts in interest rates.

Such a move may in turn lead to cheaper mortgages.

Last week Bank of England deputy governor Sir John Gieve suggested it may be necessary to trim the base rate further, despite it already being at an all-time low of 1.5 per cent.

He said: "In setting policy, the authorities both here and overseas need to consider whether further action on interest rates, or other monetary measures, or fiscal action is required."

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